On the surface, it looks like Carl Icahn came out on top in the battle over nutritional-supplements seller Herbalife. But rival Bill Ackman has reason to feel at least somewhat vindicated.

Icahn has been one of Herbalife's biggest backers (making a roughly $500 million paper profit to date), while Ackman's Pershing Square famously bet $1 billion in 2012 that the company would be shut down by regulators. On Friday, the three-year-plus saga drew to a close as Herbalife announced a settlement with the Federal Trade Commission that allows it to keep operating. Icahn claimed victory, saying "the shorts have been completely wrong on Herbalife." But were they really?

Coming up Short

Bill Ackman's Pershing Square's long-time commitment to its Herbalife short position is set to be one of his worst trades ever

Source: Markit, Bloomberg

Sure, Herbalife avoided the worst-case scenario, but it's not walking away unscathed. The company agreed to pay $200 million to settle charges that it deceived consumers into believing they could earn substantial money by selling Herbalife products and had an unfair compensation system that encouraged recruitment for the sake of recruitment, rather than in response to actual demand.

That's really the core of what Ackman has been saying all along. He was perhaps overzealous in his claims against Herbalife and missed the mark with his predictions of utter destruction. While he has since restructured his short bet with options, Ackman is likely feeling a squeeze today with Herbalife shares jumping as much as 22 percent. But it's not exactly a ringing endorsement when FTC chairwoman Edith Ramirez says Herbalife "is going to have to start operating legitimately.'' Ouch.

Healthy Glow

Herbalife has seen its shares rise despite a decline in sales at the maker of protein shakes and other nutritional supplements . Its resilience has squeezed short-sellers like Bill Ackman's Pershing Square.

Source: Bloomberg

Herbalife, for its part, says that it believes many of the FTC's allegations are wrong, but decided to settle so that it could finally be done with a nightmare that's haunted the company for so long. Moving on is not just a matter of writing a check, though.

The changes Herbalife has agreed to make to its operations are going to -- as the FTC says -- "fundamentally restructure its business." These include revamping compensation to reward distributors primarily based on retail sales and requiring at least one year of experience and business training before allowing them to open a Herbalife nutrition club. Herbalife says that it was starting to make changes along the lines of the settlement terms. And that's great -- but would any of that have happened if Ackman hadn't shined a giant spotlight on the company?

With the regulatory morass seemingly behind it, the focus will shift to where Herbalife goes from here. It's important to remember that the settlement with the FTC only covers Herbalife's business in the U.S., which makes up about 20 percent of its revenue. If you believe Icahn, the steps taken thus far to modify Herbalife's sales practices haven't hurt earnings "one iota." But it's hard to see how these agreed-upon changes -- which include a prohibition on advertising lavish lifestyles for would-be distributors and proving that at least 80 percent of sales are to legitimate end users -- don't take at least some kind of bite out of future sales by cooling efforts from existing distributors and deterring new candidates.

Now What?

Herbalife's FTC settlement impacts only its U.S. business, which accounts for around 20 percent of its revenue. The company's sales declined last year for the first time since 2009.

Source: Bloomberg

Not to mention Herbalife is operating in a direct-selling market that has seen better days. Sales are struggling amid the pervasiveness of online retailing, and low unemployment means there aren't as many people lining up to become sales representatives, according to Euromonitor. In the U.S., the direct-selling market is expected to grow at a compound annual growth rate of just 0.2 percent through 2020, the data provider said.

Icahn, ever the activist, suggested one way for Herbalife to create value for shareholders: strategic opportunities, aka, M&A. But that's a long shot, even if he does have five seats on the 13-person board and the chance to increase his stake in the company to about 35 percent.

As for its prospects as a possible target, the company’s share-price pop decreases its appeal in that regard. Already, it’s valued at $6.3 billion, and adding a 30 percent premium, any buyer would need to spend close to $8.2 billion. Apart from the lofty price tag, no buyer -- private equity or otherwise – will take action until there’s clarity around the company’s financial performance. That’s in part because lenders examine a company’s earnings stability when determining how much debt they can extend in a buyout. And such stability may be years away.

Ackman said Thursday on CNBC that he felt "very good" about his stance on Herbalife. Should the company stumble going forward, he may recoup some of his losses or better yet, break even.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

The company also said it had reached a $3 million settlement with the Illinois attorney general.

The clubs were a key focus point of Ackman's campaign, with the activist investor estimating distributor-owned outlets lost an average of $12,000 a year. The FTC said Herbalife's own survey showed about 57 percent of club owners made no profit or lost money.

As part of the settlement, Herbalife must be monitored by an independent auditor for seven years.